Economic “Stimulus” = Impatient Politics Trumping Good Policy

With all the news of economic slowdown nearing fevered pitch, some Americans will like the sound of a few hundred extra bucks in their pockets. Hey, it sounds good to me, too. Except it’s not a tax break in the sense of getting to keep more of your own hard-earned money. It’s plain old wealth redistribution, as explained by George Mason economist Russell Roberts in this piece (HT Rossputin):

The money has to come from somewhere. If you raise taxes to fund the plan, the people who are taxed are poorer and they’ll spend less. If you borrow money to fund the plan, the people who buy the government bonds have less money to spend and that offsets the stimulus. It’s like taking a bucket of water from the deep end of a pool and dumping it into the shallow end. Funny thingâ€”the water in the shallow end doesn’t get any deeper.

And even the people who get the money often save more of it than they spend.

That’s why stimulus schemes based on giving people money have a poor track record of energizing the economy. Usually, the only thing that gets stimulated is a politician’s approval rating.

We’ve got a lot of politicians making pie-in-the-sky promises, and even a few plausible-sounding ones, like doling out a few hundred bucks of revenue to everyone will kickstart the economy.

It would be short-term relief, yes.

But certainly not good long-term economic policy (which, of course, has very little to do with getting elected).